If you’re thinking about selling your motorhome on consignment, there’s something you should know about RV insurance. Most insurance companies do not cover RVs consigned on a dealer’s lot.
“We do not have a single affiliate company that will insure consigned vehicles,” said Jack Ingle, business development manager for Aon Recreation Insurance, a specialty RV insurance agency. “A consigned coach is considered as being, in the language of the insurance contract, 'out of your care, custody and control.' "
The topic of insurance for consigned vehicles has surfaced many times during Ingle’s 25-year career in insurance. “I’ve asked companies for an endorsement that could be added to policies for a charge for owners who want to sell their coach this way, and I’ve had absolutely zero luck.”
Yet, RV owners might presume consigned RVs are covered by their current policy. Or, they assume the consignment dealer has umbrella coverage that applies to all vehicles on the sales lot.
RV owners who make those assumptions put themselves at financial risk. Just ask FMCA member Fred O’Byrne.
O’Byrne, of northern Alabama, decided to consign his 1999 Foretravel U320 with Tennessee RV in Knoxville. After signing the consignment agreement, he called his agent at Twin Peaks Insurance, an affiliate of National Interstate Insurance Co., to discontinue a portion of his full-timer coverage. It was merely a cost-saving measure; why pay for unnecessary coverage while the coach is consigned at the dealership and not used as a residence?
But Twin Peaks told him that physical damage to his motorhome — from fire, hail, lightning, vandalism, falling objects — would not be covered when the coach is not under his personal control. “If there is a claim that happens on the dealer’s lot and it’s consigned, my insurance company will deny the claim due to an exclusion in my policy,” O’Byrne said. “But if I’m selling the RV and it’s not on the dealer’s lot, I’m covered.”
O’Byrne then learned that the dealer’s insurance covers only the vehicles it owns — the ones it buys outright or accepts on trade-in.
“What I’m finding out is a lot of the dealers are not aware that RV owners’ policies don’t cover it. I would think the dealership ought to be able to advise me, ‘Look, check with your insurance company because your policy probably does not cover it.’ ”
O’Byrne started calling other insurance companies around the country, figuring someone must offer coverage for consigned RVs. “There’s nothing else out there. Every single insurance agency that I talked to said that every company they represented had that exclusion in their policy.”
He said he was “absolutely stunned” when he found out about this insurance quandary, and he suspects many others aren’t aware of the consignment exclusion, either.
“Unless they have actually told their insurance agent that their unit is consigned, they actually don’t even know they’re not covered. It’s in the fine print in the policy, and if you’ve had the unit for seven or eight years, and you read your policy seven or eight years ago, the likelihood of remembering that is kind of slim. It didn’t mean much to you at the time because you weren’t planning to sell it.”
The ownership factor
Aon’s Ingle, an RV insurance specialist who presents seminars at FMCA rallies and conventions, understands the insurance predicament.
“When you consign the RV to somebody else, it’s not in your care, custody or control,” he said. “It’s in the other person’s care, custody or control. Anyone could get in it and have a wreck and the insurance company would be on the hook.”
It would be difficult for a dealer to insure a consigned RV, he said. “You cannot insure something you do not own. If you could, in the event of a claim, the insurance company would write him [dealer] a check for something he didn’t own, so he’d gain from a loss. That goes against the principle of insurance, which states 'you cannot gain from a loss.' "
The bottom line: If a consigned RV becomes damaged, the lending institution is still going to want money, Ingle said. “It is a problem and my guess is that there are a lot of people who are consigning and do not know about this exclusion in their policy."
PPL Motor Homes in Houston, Texas, has specialized in RV consignment since 1972. It claims to sell at least 1,200 consigned RVs per year and generally has about 230 consigned RVs for sale on its 15-acre consignment lot.
“We ask sellers to verify with their own insurance carrier if they have a provision that excludes coverage while they are on a sales lot or consignment lot,” said Sharon Ball, who handles insurance services for PPL. “Because the vehicle is on consignment, they’re still the titled owner and they still have the insurable interest.”
Not all insurance companies exclude, though, she said. “We always ask them to contact their agent and verify because we have no idea what policy they have or who their carrier is.”
San Jose, Calif.-based Family RV advises consignors to keep their insurance current. The company’s Web site states: “Family RV is insured and will do our best to protect your RV, but your insurance is necessary to cover your RV while it is on our lot.”
San Juan RV in San Juan Capistrano, Calif., also has an RV consignment program. When a consigned RV is test driven, the dealership’s insurance will cover it, said Paul Kellick, manager. But when it’s parked on the dealership lot, the owner is responsible for insurance.
Agents chime in
Lori VanderWall, an agent with Thum Insurance Agency L.L.C., said the consignment exclusion often is referred to in policy guides under “dealer possession for sale.” “If a customer is selling a coach personally, we don’t’ have any trouble covering it,” she said, “but as soon as it’s on a dealer’s lot it’s not covered. Maybe there are some carriers who don’t have the exclusion written into their policy. All the carriers whom we work with do have that.”
Many RVers probably assume they’re vehicle is covered while on a dealer’s sales lot, VanderWall said. “A lot of dealers will add the consigned vehicle right to their dealer lot insurance policy. Probably the best thing for RV owners to do would be to confirm with the dealer.”
Amanda Manning, insurance agent with the Miller Insurance Agency, also said most carriers have a consignment exclusion listed in their policy guide. “A consigned RV is “out of the care, custody and control of the insured,” she said. “But a lot of people don’t look at their own policy jacket to see what exclusions are in there. Unless they call and we tell them, they really don’t know.”
In late May, Fred O’Byrne scheduled his motorhome for service at the Knoxville dealership, rather than leave it on the consignment lot, uninsured.
Convinced that consigned motorhomes are an untapped market for insurers, O’Byrne suggests companies offer an insurance rider and charge an extra premium. “I’ve talked with dealers’ insurance agents, and they were going to look into the possibility of offering a rider the dealer could sell.”
Jack Ingle also recognizes the need for this type of insurance. “I don't know any insurance carriers who cover consigned RVs," he said. "And we’ve researched it. If I knew, I could sure place a lot of insurance with them."
Ingle’s advice to RVers interested in consigning: “I would check with your carrier and if they do cover consigned RVs, fine. If they don’t, I don’t know how to get around it. You become your own insurance company at that point in time. The trouble is, if you have a lien against your RV and you have a loss, you still have to pay the bank. And that's a big problem.”
O’Byrne said his lender, GEMB, advises customers to sell the RV themselves — unless they can find a dealership that offers insurance services specific to RVs on consignment lots. “All the dealers I talked with said their insurance does not cover it on their lot, and they expect the owner to maintain insurance,” he said.
RV owners who don’t want to sell their unit themselves can trade it in and have the value applied to their new purchase. In that case, the dealer takes title of the vehicle and can insure it, of course.
Online consignment, offered by dealers such as MotorHomes USA, is another option. The motorhome stays with you and its only exposure is online viewing. You maintain your insurance. And, perhaps most important, the RV stays in your care, custody and control.
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Editor's note: In an e-mail sent to FMCA nearly three weeks after this story was published, Fred O'Byrne gave this update on his search for RV consignment insurance:
"The dealer's insurance agent finally came up with a solution last week. They were willing to add physical damage coverage for my coach to the dealer's policy, and bill it separately so the dealer could re-bill me. The rate was set at $0.35 per $100 monthly; for a coach valued at $100,000, it amounted to $350 per month. Fortunately, I was able to sell my coach at the end of last week."